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Oil firm to boost exports from Kurdish area despite Iraqi threats

Genel Energy PLC, a company led by the former BP chief executive that recently started shipping oil from Iraq's self-rule Kurdish region, said Friday it plans to increase the amount it exports from the enclave despite Baghdad's opposition.

In this 2009 file photo, an employee works at the Tawke oil fields in the semiautonomous Kurdish region in northern Iraq. (Hadi Mizban/File/Associated Press)

Genel Energy PLC, a company led by the former BP chief executive that recently started shipping oil from Iraq's self-rule Kurdish region, said Friday it plans to increase the amount it exports from the enclave despite Baghdad's opposition.

The exports risk provoking lawsuits from the central government and are likely to exacerbate tensions between Baghdad and Iraq's Kurdish minority, who have been at loggerheads for years over how to manage the country's oil wealth.

London-based Genel started exporting small amounts of oil on Jan. 7 and expects to raise the amount to 20,000 barrels a day in the coming weeks, it said in a statement.

The company is led by Tony Hayward, who was CEO of BP at the time of the Deepwater Horizon explosion in the Gulf of Mexico. He left the British oil major after a number of perceived missteps related to the spill.

Genel Energy is headed by Tony Hayward, who was CEO of BP at the time of the Deepwater Horizon explosion in the Gulf of Mexico. ((Reuters))

Genel began exporting oil by tanker truck to Turkey after getting a green light from Kurdish authorities. It defended the exports as allowable under Iraq's constitution.

"We are today exporting oil to Turkey in accordance with the authority granted to us by the Kurdistan Regional Government and as the largest independent operator in Kurdistan, are well placed to take advantage of regional opportunities for a broader export market as the political situation continues to develop," Hayward said.

Oil rights dispute

The Kurds and Baghdad are locked in a long-running spat over oil rights. Baghdad believes the central government should manage the country's oil policy and wants all exports to travel through state-run pipelines.

The Kurds in recent years have struck dozens of deals with foreign oil companies, including Exxon Mobil Corp., Chevron Corp. and France's Total S.A.

A group of investors led by Hayward acquired Genel, formerly a Turkish company, in a $2.1 billion deal in 2011. It is the largest independent holder of reserves in the Kurdish region and one of the few companies actively producing oil in the enclave so far.

In an apparent response to Genel's exports, Iraq last week threatened to seize oil exports "smuggled across borders" and sue companies dealing in what it says is illegal trade in crude.

The Kurds on Thursday blasted suggestion that is in engaged in illicit trade in crude. In a lengthy statement, it said "the trade in oil and gas across Iraq's borders occurs as a result of official regional government policy. There is nothing clandestine or underhand(ed) about it."

Iraq sits atop the world's fourth largest proven reserves of conventional crude, with about 143.1 billion barrels. Oil revenues make up 95 per cent of the country's budget — a portion of which is earmarked for the Kurdish region. The Kurds last month suspended oil exports through a pipeline managed by Baghdad over a payment dispute with the central government.